Demographics

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Demographics is the classification of populations, especially consumers, by various characteristics, including age, gender, race, religion, and income. Demographics is vital to investing in several ways. A company's success often depends critically on its ability to understand demographics and successfully target various segments of the population. Demographics is the reason that advertisers cater to young people, who decide early in life what brand of toothpaste they like and stick with it. As the demographics of a company's customer base changes, the firm must develop new products to serve them or enter new businesses with different demographics. Demographics is also key to understanding international stock markets: companies based in high-income countries enjoy greater domestic demand, and those with high birth rates will likely enjoy strong demand in the future. Demographics can have an impact on the overall investing environment as well. For example, an investing public with older demographics may demand more fixed-income instruments, with their relatively firm prices and stable income, and fewer stocks, whose prices tend to fluctuate and whose stream of cash payments is less steady.